Business
The move will also improve its debt-equity ratio
Updated : Mar 19, 2018, 06:10 AM IST
With the reigns of the budget airline SpiceJet Ltd back in the hands of original owner Ajay Singh, it is poised to take flight with his shrewd strategy being put in place.
Marans will infuse Rs 375 crore into the budget carrier in lieu of 'non convertible preference shares' to be allotted to them despite them offloading their entire existing equity stake in favour of Singh. Marans will get an allotment of 37.5 lakh non-convertible preference shares at Rs 1,000 per share. The board has also decided to raise Rs 1,500 crore through issuance of fresh securities.
Bangalore-based aviation analysts Pankaj Pandit says the board's decision to raise Rs 1,500 crore through fresh equity issue will reduce the cost of capital and improve the debt-equity ratio of the troubled airline.
"If he (Singh) raises capital through qualified institutional placement (QIP), the cost of capital will be practically zero. It will reduce the airline's cost of capital by improving debt-equity ratio. He may also convert a lot debt into equity. That way, the airline has better holding power than now," he said.
Pandit said there will be many institutional investors and airlines keen on entering the domestic airline sector today with dramatic improvement in the market environment in the country, which has been growing at an average rate of around 16% from July to December last year.
He said policy initiatives proposed by the government and easing oil prices have also made domestic airline industry very attractive to overseas investors.
"The government allowing 49% FDI from foreign airline into domestic carrier has already seen Etihad buy stake in Jet Airways. There are many other Middle Eastern airlines interested in entering into India and this could be their chance to pick up stake at lower valuation. We may even see sovereign funds with deep pocket bring in capital," he said.
On Friday, the airline informed the BSE that entire stake of the Maran family and Kal Airways Pvt Ltd of 58.43% has been transferred to former co-founder of the airline Ajay Singh. It is not known at what price the shares have been transferred.
This decision, which was taken at board meeting held on Thursday, officially put Singh at the helm of the airline. And the exit of Kalanithi Maran, his wife Kavery Kalanithi and managing director S Natrajhen from the board paves the way for appointment of new board members.
With the change of ownership, the headquarters of the airline has been shifted to Delhi from Chennai.
The budget airline will now get the shareholders' approval through postal ballot for all these proposals.